Summer 2008 Newsletter

Date: Saturday, June 21, 2008

DOCTORATE AWARDED BUYCK

The University of South Carolina School of Law awarded the Willcox Law Firm's chairman, Mark W. Buyck, Jr., an Honorary Doctorate in Laws at its May 9th graduation ceremony. In his commencement address, Buyck challenged the graduating attorneys to live up to the highest standards of the profession, to remember that all are equal before the law, and to unfailingly respect the expectations that their clients will have for their undivided loyalty, their confidence, and their zeal. Buyck's distinguished career includes service as United States Attorney for South Carolina in the 1970's, as President of the South Carolina Defense Trial Attorneys' Association, President of the South Carolina Chapter of the American Board of Trial Advocates, a member of the National Board of the American College of Trial Lawyers, and over a decade of service on the Board of Trustees of the University of South Carolina. He is also a trustee of the Drs. Bruce & Lee Foundation, which has done much to re-invigorate the life of Florence.

TWO WILLCOX ATTORNEYS NAMED SUPER LAWYERS

Mark W. Buyck, Jr. has been recognized by Super Lawyers 2008 as one of the best 100 lawyers in South Carolina, particularly recognizing his expertise in business litigation. Reynolds Williams was likewise named in Super Lawyers 2008 for his expertise in closely-held businesses. Super Lawyers 2008 says its selections do not depend upon a popularity contest, rather upon considerable polling and peer evaluation efforts followed by detailed research that evaluates each candidate based on twelve indicators of peer recognition and professional achievement. Once lawyers have passed that screening process, the magazine's research staff follows with a process which includes checks and balances and procedural safeguards.

ADULT SOCIAL HOSTS CAN BE EXPOSED TO LIABILITY IN SOUTH CAROLINA

The South Carolina Supreme Court recently held that "an underage drinker can sue an adult social host whose provision of alcoholic beverages caused" him to harm himself or others as a result of intoxication. This decision creates tort liability where formerly there was none. For the liability to exist, the Court held that the adult social host must "knowingly and intentionally serve, or cause to be served"alcohol to a guest he knows, or reasonably should know, is underage. The liability extends not only to the minor but also to any other person injured by the minor's intoxication. The Supreme Court explicitly left open the question of whether an adult social host who is merely negligent, acting without knowledge and intention, would be held similarly liable. The implication is that such a host would be, but the issue has not actually been decided.

PROTECTION FOR PARODIES

It is the very nature of parody to present two opposing messages: that the parody is, in fact, the genuine article that is being parodied, and that it is not the original, but is instead just a parody. When used to promote a product, the parody may transgress federal trademark law if it succeeds in the first objective but not in the second. In that case, the parody will have created customer confusion, which is a critical element for a claim of trademark infringement. There was a recent victory for parody in the marketplace when a federal court rejected claims of trademark infringement and trademark dilution brought against the imitator. On one side was Louis Vuitton Malletier (LVM), the maker of luxury handbags, luggage, and even some pricey pet accessories. Some of LVM's trademarks go back to the 19th century. Distinctly at the other end of the spectrum was the upstart defendant Haute Diggity Dog (HDD), purveyor of dog toys and beds which play on the names of luxury items. Among HDD's offerings were "Chewnel No. 5" and "Dog Perignonn." You get the idea. HDD targeted LVM, in particular, by offering chew toys that were shaped like miniature handbags resembling LVM products and that used patterns evoking trademarked LVM designs. Predictably, the chew toys were sold under the name "Chewy Vuiton." Not amused, LVM sued HDD in federal court for trademark infringement and trademark dilution. Unfortunately for LVM, the court was amused, or at least it got the joke. As the court put it, the chew toy "irreverently presents haute couture as an object for casual canine destruction. The satire is unmistakable." The obvious nature of the parody was legally significant because there was no real likelihood of confusing the chew toys with the upscale leather goods they were meant to evoke. There were clear and immediate differences between the products, and even the "simplified and crude" imitation of the LVM designs was not such as to create a danger of confusion with the real thing among the dog masters who do the buying. (Dogs might see no difference and chew up a $1,000 handbag as vigorously as they would a chew toy, but they have no say in trademark lawsuits.) Trademark dilution differs from infringement in that it is not necessary to show confusion in the marketplace. It is a more nebulous concept, but prohibited dilution occurs when there is "blurring" or "tarnishment," that is, an association arising from the similarity between the challenged mark or name and the famous mark that impairs the distinctiveness of the famous mark. In the end, the very fact that the chew toy parody was successful defeated the dilution claim, just as it had the infringement claim. LVM's trademarks are quite famous--the court called them "icons of fashion." But the fame actually worked to LVM's disadvantage in court by increasing its burden of demonstrating that the parody really was likely to tarnish the distinctiveness of LVM's name and products. Not only that, but the court saw the parody as probably having a salutary effect on LVM: A successful parody might actually enhance the famous mark's distinctiveness by making it more of an icon. As the court put it, the target of the joke becomes yet more famous. You might say that the court told LVM to lighten up and see the upside of having its products lampooned.

OUTLAW VS. RULE OF LAW

Recently, court documents were uncovered from a successful civil case involving some notorious nineteenth-century defendants who were better known for avoiding the legal consequences of their acts: Jesse and Frank James. Not surprisingly, the case against the James brothers stemmed from one of their signature activities, a bank robbery. During an attempted bank robbery by the brothers in Gallatin, Missouri, in 1869, Jesse James killed a cashier. As the brothers made their getaway, Jesse was thrown from his horse, which he left behind in favor of doubling up on Frank's horse. Soon thereafter, the brothers happened upon the unfortunate Dr. Smoote, who was also on horseback. Jesse relieved Smoote of his horse, at gunpoint, and continued the escape. Smoote was not the first or last victim of the James brothers, but he was unusual in then bringing, and winning, a lawsuit against them for the full value of the horse, saddle, and bridle that they had stolen. One might expect the outlaws to have ignored the lawsuit altogether, but the brothers answered the lawsuit by arguing that they were not personally served with notice of it. Although a sheriff testified that he had delivered the papers to the James family farm (pity the process server charged with serving a summons on Jesse James), the case was dismissed on that technicality. That might have been the end of the litigation, were it not for Jesse's decision to publish a letter in a newspaper declaring himself innocent of the holdup and murder. Correctly pegging Jesse James as a newspaper reader, Smoote's attorney cleverly won the court's approval to file a notice of service in the classified section of a local newspaper, thus giving Dr. Smoote another bite at the apple. Again, through their attorney, the James brothers initially fought the lawsuit, but soon they withdrew from the suit and allowed a judgment to be entered against them for $223. The judgment was satisfied when Smoote took possession of the horse which Jesse had left behind at the robbery. Yes, Dr. Smoote had to endure the dreaded prospect of staring down the barrel of Jesse James's weapon, but in dollars and cents he fared well. The horse he now had, which Jesse had bought with cash gained from some of his successful robberies, was believed to have been from Kentucky racing stock and was valued at $500 (a considerable sum for the time). LAWYER'S

APPROVAL FOR ACCEPTANCE OF OFFER

When the owners of a party store received an offer to purchase not the entire property, but only their liquor license and fixtures, they accepted the offer, but on the condition that their attorney approve the deal. Before the attorney's review of the first offer, the owners received a better offer from another potential buyer, this time for the entire property, including the license, the fixtures, the real property, and the business itself. The second offer was for about five times as much money as the first offer. The owners also accepted this offer, but again conditioned acceptance on approval by their attorney. The owners' attorney then reviewed both offers at the same time and, not surprisingly, approved the second, more favorable one. The disappointed party that had made the first offer sued the owners to enforce what it regarded as a completed contract for the sale of the license and fixtures. It contended that the sellers had waived the requirement of attorney approval by their bad faith in simultaneously submitting to the attorney two competing purchase agreements, both of which conditioned acceptance on approval by the attorney. The disappointed party further argued that, by procuring the second offer and prospective agreement, the sellers had wrongly hindered the fulfillment of the only condition remaining to be fulfilled on the first agreement--attorney approval. A court disagreed that there was any bad faith and upheld the contract formed when the second offer was accepted and approved by the sellers' attorney. While the plaintiff had been the first to make an offer of any kind, nothing in its potential contract prohibited the sellers from considering other offers. Nor were the sellers obliged to take the property off the market pending review of the first offer by legal counsel. Consideration and eventual full acceptance of the second offer was not legally impermissible where the first offer had been only conditionally accepted. There was no limit on what aspects of the first agreement were subject to the attorney's approval. He was free to disapprove it, as he did, simply because there had been a better competing offer made by a competing prospective buyer. Moreover, the sellers had not interfered with their attorney's actions, such as by instructing him to disapprove the first offer. In short, the sellers had not acted in bad faith. They were guilty of nothing more than shrewd business moves during what the court described as a period of "dickering" that preceded the formation of an enforceable contract. LIKE-KIND EXCHANGES Normally, capital gains are recognized and taxable upon the sale of property. The Tax Code provides an exception to this rule for certain exchanges of property. If all requirements are met, any gain from the exchange is not taxed, and any loss cannot be deducted. Gains or losses will not be recognized until the person who received property in the exchange sells or otherwise disposes of it. The most common type of nontaxable exchange is the exchange of property for the same kind of property, or like-kind exchanges. Requirements To qualify as a like-kind exchange, the property traded and the property received must be both (1) qualifying property and (2) like property. Qualifying property must be held either for investment or for productive use in a trade or business. Typical examples include machinery, buildings, land, trucks, and rental houses. Like property refers to the nature or character of the property. Characteristics relating to the grade or quality of the property are immaterial. All real estate is like-kind to all other real estate, whether or not one or both of the properties are improved. Similarly, an exchange of personal property for similar personal property is an exchange of like property. Because a straight swap of property is often impractical, the Tax Code allows deferred like-kind exchanges. If the transaction is structured properly, a person can sell one property, have the proceeds held for a period of time, and then use the proceeds to buy new property. The seller must identify the replacement property within 45 days of selling the relinquished property. Also, acquisition of the replacement property must take place within 180 days of the sale of the relinquished property, or the due date of the taxpayer's return for that year, whichever is earlier. Qualified Intermediary It is common to use a qualified intermediary in making a deferred exchange of like property. A qualified intermediary is a person who enters into a written exchange agreement to acquire one party's property and transfer it to a second party, and also to acquire replacement property from the second party and transfer it to the first party. The agreement must explicitly limit the first party's rights to obtain in any way the benefits of money or other property held by the intermediary. A qualified intermediary cannot be either an agent or a relative of the "exchanger." There are special rules for like-kind exchanges between related persons. In this context, "related persons" include not only spouses, siblings, parents, and children, but also a corporation in which an individual has more than 50% ownership, and a partnership in which an individual owns over 50% of the capital or profits. For a like-kind exchange between related persons, the ability to postpone tax liability for the gain from the exchange is lost if either person disposes of the property within two years after the exchange. An exchange of like-kind property is only partially nontaxable if the taxpayer also receives money or unlike property in an exchange that produces a capital gain. In that case, the gain is taxable, but only to the extent of the money received and the fair market value of the unlike property. Factors to Consider In general, three basic factors may be considered in deciding whether a like-kind exchange will make sense. The exchanger should (1) receive property with a price equal to or greater than that of the relinquished property; (2) have as much, or more, debt in the acquired property as in the property given up; and (3) take no cash out of the transaction. While these are good general guidelines, they are not a substitute for sound advice from an attorney familiar with all of the requirements for a valid like-kind exchange.

LESBIANS BOUND TO WIN?

Three islanders from Lesbos--home of the ancient poet Sappho, who praised love between women--have taken a gay rights group to court in Greece for using the word "lesbian" in its name. One of the plaintiffs said this month that the name of the association, Homosexual and Lesbian Community of Greece, "insults the identity" of the people of Lesbos, also known as Lesbians. "My sister can't say she is a Lesbian," said Dimitris Lambrou. "Our geographical designation has been usurped by certain ladies who have no connection whatsoever with Lesbos."